Which of the following intercompany transactions would not require a worksheet elimination in the consolidation process? a. The subsidiary’s payment of rent to its parent. b. The sale of merchandise by a parent to its subsidiary. c. The amount of a loan to the subsidiary made by its parent. d. None of the above.

Which of the following intercompany transactions would not require a worksheet elimination in the consolidation process? a. The subsidiary’s payment of rent to its parent. b. The sale of merchandise by a parent to its subsidiary. c. The amount of a loan to the subsidiary made by its parent. d. None of the above.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Which most accurately describes what happens to consolidation worksheet entries, assuming there is no push down accounting Worksheet entries are posted only to the ledgers of the subsidiary as post closing entries Worksheet entries are posted to the ledgers of the company owning the noncontrolling interest Worksheet entries are posted to the ledgers of both the parent and subsidiary as post closing entries Worksheet entries are posted only to the ledgers of the parent as post closing entries Worksheet entries are not posted to either the books of the parent or the subsidiary
Which of the following items shall be cancelled on consolidation? a. Receivables related to intra-group sales b. Payables related to intra-group purchases c. Unrealised profit on intra-group transactions d. Loans related to intra-group lending e. All of the above
What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.
Choose the correct. What is push-down accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A subsidiary’s recording of the fair-value allocations as well as subsequent amortization.d. The adjustments required for consolidation when a parent has applied the equity method of accounting for internal reporting purposes.
Which of the following is not typical of the journal entries prepared by a parent company to account for its subsidiary’s operations under the cost method of accounting Accrual of the parent company’s share of the subsidiary’s net income or loss A credit to the intercompany dividend income account Deprecation and amortization of differences between current fair values and book values of the subsidiary’s identifiable net assets on the date of the acquisition. None of the foregoing.
General questions Under GAAP, a parent company should exclude a subsidiary from consolidation if: It measures income from the subsidiary under the equity method The subsidiary is in a regulated industry The subsidiary is a foreign entity whose books are recorded in a foreign currency The parent does not have control of the subsidiary The FASB’s primary motivation for requiring consolidation of all majority-owned subsidiaries was to: Ensure disclosure of all loss contingencies Prevent the use of off–balance sheet financing Improve comparability of the statements of cash flows Establish criteria for exclusion of finance and insurance subsidiaries from consolidation
The entry to cancel the effects of the intercompany transactions in preparation of theConsolidated FinancialStatements are made on: A.the books of the subsidiaryB.The books of the parent if downstream sale, and the books of the subsidiary if upstream saleC.the books of the parentD.the working paper
Which of the following statements is not correct in relation to consolidation accounting key terms? Select one alternative: Consolidated financial statements are financial statements of a group of entities presented as if that group was acting as a single economic entity. A parent is an entity that has more than one subsidiary. A subsidiary is an entity that is controlled by another entity. A group comprises a parent and all of its subsidiaries.
The following must be eliminated in the consolidation process except: 1. Sales between parent and subsidiary 2. Sales between subsidiary and parent 3. Intercompany dividends (under cost method) 4. Sales made to unaffiliated parties
At the date of purchase, business combination resulting in a parent-subsidiary relationship, the difference between current fair values and carrying amounts of the subsidiary’s net asset is: A. Recorded in the applicable asset and liability accounts of the parent company B. Reflected in a consolidation elimination C. Recorded in the applicable asset and liability accounts of the subsidiary D. Accounted for in some other manner.
What is a basic premise of the acquisition method regarding accounting for a noncontrolling interest?a. Consolidated financial statements should be primarily for the benefit of the parent company’s stockholders.b. Consolidated financial statements should be produced only if both the parent and the subsidiary are in the same basic industry.c. A subsidiary is an indivisible part of a business combination and should be included in its entirety regardless of the degree of ownership.d. Consolidated financial statements should not report a noncontrolling interest balance because these outside owners do not hold stock in the parent company.
According to PFRS 10A. A parent entity is required to consolidate its subsidiaries only for internal reporting purposes.B. A parent entity is required to consolidate its subsidiaries.C. A parent need not consolidate a subsidiary if the subsidiary’s business is different from that of the parent.D. A parent entity is encouraged but not required to consolidate its subsidiaries.

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a.	The subsidiary’s payment of rent to its parent.
b.	The sale of merchandise by a parent to its subsidiary.
c.	The amount of a loan to the subsidiary made by its parent.
d.	None of the above.